Gregory James Company, Inc. can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things simmered down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Cedartown, Polk County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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